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USD/JPY at three-year highs after US jobs market data

Momentum remains bullish and dips are expected to be bought as long as the greenback trades above the 111 level.

The greenback managed to score some impressive gains against the yen, supported by rising US yields and dovish official comments from Japan. On Monday, it was trading at around 113, the level last seen in December 2018.

Labor market data helped USD/JPY

On Friday, US yields surged notably, pushing the 10-year yield above the 1.6% threshold for the first time since early June. Hand-in-hand went the USDJPY pair, and it soared toward 113, reaching levels last seen in December 2018.

Traders paid attention to the latest US labor market update. The jobs report was the lowest this year, with only 194,000 nonfarm jobs (nonfarm payrolls) added last month , well below the official consensus. On the other hand, the unemployment rate improved further, along with wage growth, sending US yields and the USD/JPY pair above some key technical levels.

Big banks are bullish

Economists at Credit Suisse expect the pair to trend higher for the 2018 highs at 114.26/55 initially and then 117.20, the long-term downtrend from April 1990. Economists at Rabobank expect the pair to pounce the 113.70 December 2018 peak on an erosion of the 113.00 psychological level.

Sociรฉtรฉ Gรฉnรฉrale analysts said that USD/JPY has now crossed above the peak of 2020 at 112.23/112.00, highlighting the persistence of upward momentum. The following potential objectives are located at 113.10 and projections of 113.40/113.90.

Lastly, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, reported that USD/JPY had overcome the important 112.23/50 zone, representing highs since 2019. The break above here introduces scope to 114.55, the October 2018 high.

Meanwhile, Japanese Prime Minister Fumio Kishida said he is keen to compile an economic package as early as the next month .

Achieving solid economic growth is most important, which we will do via bold monetary policy, flexible fiscal policy, and growth strategy, Kishida continued.

His comments undermined the JPY further as it looks like Japan will have the loosest fiscal and monetary policy among the G10 nations.

On the downside, the greenback should remain above previous highs in the 111 region to confirm all these bullish calls . Conversely, a decline below 111 could lead to another leg lower, targeting the 50-day moving average at 110.30, or the psychological zone of 110, where the pair had spent a considerable time over the previous months.

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